Bray et al v QFA Royalties Doc.

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Case 1:06-cv-02528-JLK Document 52 Filed 02/21/2007 Page 1 of 9

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 06-cv-02528-JLK

______________________________________________________________________________

CHRISTOPHER BRAY,
SABINE BRAY,
TRAINING PROS, INC.,
HAKIM ABID,
ALLISON ABID,
BRAD FIX,
JAN FIX, and
BJ AND F LLC,

Plaintiffs,

v.

QFA ROYALTIES LLC, a Delaware limited liability company,

Defendant.
______________________________________________________________________________

PLAINTIFFS’ RESPONSE TO MOTION FOR SANCTIONS

______________________________________________________________________________

COME NOW plaintiffs Christopher Bray, Sabine Bray, Training Pros, Inc., Hakim Abid,

Allison Abid, Brad Fix, Jan Fix, and BJ and F LLC, by and through their undersigned counsel,

and provide the Court with this Response to Defendant’s Motion for Sanctions.

On February 11, 2007 on the eve of the first scheduled day of a Court-ordered evidentiary

hearing on Plaintiffs’ Motion for Preliminary Injunction, Defendant filed a Motion for Sanctions

of Denial of Motion (“Motion”). Defendant filed this Motion in response to what it termed

Plaintiffs’ “late filed reply brief,” but was in fact Plaintiffs’ pre-trial brief filed in accordance

Dockets.Justia.com
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with this Court’s specified procedures.1

Defendant’s Motion alleges without foundation that the inclusion of the confidential

material was malicious and part of a conspiracy theory concerning a broader intent behind

Plaintiffs’ pre-trial brief. Plaintiffs concede that the inclusion of specific settlement information

was improper, but was merely inadvertent. Submitted herewith as Exhibit A is the Declaration

of Gregory Stross, Esq., counsel for Plaintiffs (“Stross Declaration”). Mr. Stross’ Declaration

more fully discusses the facts and circumstances related to the filing of the pre-trial brief.

The improper disclosure was minimal2, actually casting the limited settlement in a highly-

favorable light for Defendant and resulting in little or no prejudice. Further, Defendant’s filing

of this Motion appears to be a detailed effort to present its side of the story to this Court and

those in the public it asserts might be interested in this litigation.

Defendant’s Motion must be denied for several specific reasons: 1) Defendant failed to

comply with the Local Rules in filing its Motion; 2) Defendant failed to comply with the Federal

Rules of Civil Procedure in filing its Motion; and 3) Plaintiffs’ counsel’s inadvertent inclusion of

the very limited amount of information concerning the then-unsigned settlement agreement33

caused no harm or prejudice to Defendant.

1
See Kane Memorandum concerning Pretrial and Trial Procedures, p.10, revised 12/30/03, that states, “Trial briefs
are encouraged for use in bench trials, but are of dubious import in jury trials.”
2
The improper disclosure was limited to the sentence clause indication that the settlement plaintiffs would “provide
comprehensive releases of all possible claims” (pre-trial brief, p.4) and that the settlement in the related case of QFA
Royalties, LLC, v. TSFA would provide for the website to have limited public access. All other information –
dismissal of the suits themselves and plaintiffs’ rights to continue to operate their restaurants, would be public
information.
3
The five Plaintiff groups did in fact resolve their disputes with Defendant.
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I. Denial Of The Motion On Its Face Is Appropriate As Defendant Failed To

Comply With Local Rule 7.1.

In its haste to file the Motion prior to the commencement of the evidentiary hearing,

Defendant disregarded the requirements of conferring with opposing counsel, pursuant to Local

Rule 7.1. D.C.COLO.LCivR 7.1. Concomitantly, Defendant failed to provide the required

statement of compliance with the Local Rules in its Motion. D.C.COLO.LCivR 7.1. As such,

the Motion was, on its face, improperly filed.

Local Rule 7.1 provides, inter alia,

The court will not consider any motion, other than a motion under Fed.R.Civ.P.
12 or 56, unless counsel for the moving party or a pro se party, before filing the
motion, has conferred or made reasonable, good-faith efforts to confer with
opposing counsel or a pro se party to resolve the disputed matter. The moving
party shall state in the motion, or in a certificate attached to the motion, the
specific efforts to comply with this rule.

D.C.COLO.LCivR 7.1.A.

Strict compliance with Local Rule 7.1 is not always mandated. See e.g, Birdie, LLC, v.

Mon Petit Oiseau, LLC, slip opinion, 2006 WL 2583593, D.Colo., Sep. 6, 2006 (J. Babcock

noting that the conceded failure to certify a conferring among counsel did not exclude

consideration of the motion since correspondence discussing the desire to transfer the action

could be construed to have complied with Local Rule 7.1.A). In certain circumstances, the

failure to comply with Local Rule 7.1, however, may result in the Tenth Circuit refusing to

review the denial of a motion. See e.g., Hartnett v. O'Rourke, 69 Fed.Appx. 971, 982 (10th Cir.

2003) (Court of appeals refused to review denial of Motion where movant failed to comply with

Local Rule 7.1).

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Unlike in the Birdie case, however, here the lack of certification under Local Rule 7.1.A

was due solely to the failure to undertake any type of communication with opposing counsel

concerning the subject of the motion.

Defendant’s failure to comply with the Local Rules mandates denial of this Motion.

II. Denial Of The Motion On Its Face Is Appropriate As Defendant Failed To

Comply With Fed.R.Civ.P. 11(C)(1)(A).

It is undisputed that Defendant’s counsel did not confer with Plaintiffs’ attorneys prior to

the filing of this Motion, provided no forewarning, and provided no “safe harbor” as is required

under the Federal Rules of Civil Procedure. Fed.R.Civ.P. 11. To the extent Defendant seeks

sanctions under Fed.R.Civ.P. 11 (Motion, p.5-6), it failed to comply with the procedural

requirements of Rule 11(C)(1)(A) and therefore denial of the Motion is mandated.

Fed.R.Civ.P. 11 provides, in pertinent part, as follows:

(c) Sanctions. If, after notice and a reasonable opportunity to respond, the court
determines that subdivision (b) has been violated, the court may, subject to the
conditions stated below, impose an appropriate sanction upon the attorneys, law
firms, or parties that have violated subdivision (b) or are responsible for the
violation.

(1) How Initiated.

(A) By Motion. A motion for sanctions under this rule shall be made
separately from other motions or requests and shall describe the specific
conduct alleged to violate subdivision (b). It shall be served as provided
in Rule 5, but shall not be filed with or presented to the court unless,
within 21 days after service of the motion (or such other period as
the court may prescribe), the challenged paper, claim, defense,
contention, allegation, or denial is not withdrawn or appropriately
corrected. If warranted, the court may award to the party prevailing on
the motion the reasonable expenses and attorney's fees incurred in
presenting or opposing the motion. (Emphasis added)* * *

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F.R.Civ.P. 65(c)(1)(A) (emphasis added); see Roth v. Green 466 F.3d 1179, 1191 (10th Cir.
2006).

Rule 11 sanctions may be sought by motion, but the Rule requires that such motions

follow a specific procedure. The Rule requires that the motion first be served on the opponent,

but that the movant wait at least 21 days before filing the motion with the court. Fed.R.Civ.P.

11(c)(1)(A). If, during the 21-day “safe harbor” period, the challenged pleading is withdrawn or

corrected by the opponent, the movant cannot seek sanctions. Id.; see also Consumer Crusade,

Inc., v. Public Tel. Corp. of Am., slip opinion, 2006 WL 2434081 (D.Colo. Aug. 21, 2006);

McCoy v. West, 965 F. Supp. 34 (D.Colo. 1997).

Failing to confer or attempting to confer causes unnecessary motions to be filed, as was

likely the case here. Requiring the courts to resolve disputes that the parties themselves could

have resolved, needlessly expends resources that could better be utilized elsewhere. Coumerilh

v. Tricam Indus., Inc., slip opinion, 2007 WL 470621 (D.Colo. Feb. 5, 2007). Failure to confer

on a motion may lead to a denial of the motion and can in fact lead to sanctions for the attorney

filing the motion. Id.; see also 5A Charles Alan Wright and Arthur R. Miller, Federal Practice

and Procedure § 1337.2, at 722-3 (3d ed. 2004) (“a failure to comply with [Rule 11] [should]

result in the rejection of the motion for sanctions”).

Defendant failed to comply with Rule 11, allowing the requisite 21-day safe-harbor

period, accordingly, the Motion should be denied.

III. Defendant Has Suffered No Prejudice And Plaintiffs’ Attorney’s Actions

Were Not Deliberate Or Intentional.

Contrary to Defendant’s assertions, Plaintiffs’ attorneys had no grand plan or strategy to

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divulge any of the terms of any purported settlement agreement or the negotiations that led up to

the forging of any such agreement. In fact, had Defendant complied with Local Rule 7.1.A. or

FR.Civ.P 11, Plaintiffs would have immediately sought to have its pre-trial brief placed under

seal or stipulate to such additional disclosures as defendant may have requested in order to

ameliorate any negative effect from the improper disclosure. However, Defendant chose to

hastily file the instant Motion in an apparent effort to correct any misconceptions it felt were

caused based upon Plaintiffs’ brief. Choosing this course of action was not only contrary to

applicable rules, but effectively alleviated or eliminated any alleged prejudice it may have

otherwise suffered.

There is no question that Mr. Stross’ inclusion of the settlement information was

improper, however, the factual background and cause of the error lacks any nefarious intent. As

noted in the Declaration of Gregory Stross, counsel for plaintiffs divided duties such that Justin

Klein, Esq. exclusively addressed settlement with defendant’s counsel. Stross Declaration, p.1-2.

Mr. Stross played no role in the negotiation of the settlement agreements with defendant’s

attorneys, which involved several weeks and numerous edited versions. Stross Declaration, p.1-

2. Mr. Stross during this period was responsible for the composition of the pre-trial brief. Stross

Declaration, p.2. At the time the pre-trial brief was filed, the parties had not formally executed

the settlement agreements. Stross Declaration, p.2. The agreement was signed and forwarded to

Defendant’s Counsel by Mr. Klein a day later, on February 10, 2007. Stross Declaration, p.2.

Although Mr. Stross knew that the agreement contained a general confidentially provision, he

had never reviewed the agreements in any form. Stross Declaration, p.2.

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At no time was there any intent to disclose the confidential contents of the settlement

agreement and such information was intended only to be informational for the Court in

preparation for the hearing. Stross Declaration, p.2-3.

Additionally, it should be noted that during oral argument, held on February 8, 2007,

prior the filing of the Plaintiffs’ Trial Brief, Defendant’s counsel, Fredric Cohen, Esq. disclosed a

portion of the intended settlement agreement in open court. When arguing his need to depose

then-plaintiff Jehad Majed, Mr. Cohen informed the Court,

In that Settlement Agreement, one of the conditions of each of the settling

plaintiffs is that they give us full disclosure of their own individual involvement in
the decision to post the suicide note on the website and their own involvement in
the execution of that decision.

Exhibit B, Reporter’s Transcript (motion for protective order), 2/8/07, p.9, l.11-16.

This was undoubtedly germane to his argument, but was nonetheless a unilateral

disclosure to the Court of a provision in the otherwise-confidential settlement agreement –

exactly the action Defendant complains of to the Court in its sanctions Motion just 72-hours

later. Using Defendant’s reasoning, Plaintiffs might have argued that Mr. Cohen’s disclosure

presented the Court and public with a skewed misimpression that the settling plaintiffs had

agreed to “roll over on” the remaining plaintiffs. Such argument would plainly be frivolous.

Similarly and because the disclosure by Plaintiffs’ counsel was inadvertent, Defendant’s

argument here is also without merit.

IV. Summary.

Plaintiffs’ counsel Stross admits that his negligence resulted in a very limited disclosure

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of parts of a settlement agreement with five of the plaintiff groups in this matter. The disclosure

was wholly inadvertent. Defendant’s failure to comply with both the Local Rules and Federal

Rules of Civil Procedure indicate that the Motion should be denied. Further, any potential

prejudice was spoken to at length and corrected in Defendant’s Motion.

If any type of sanction is warranted, the requested relief, denial of the motion for

injunctive relief, is unrelated to the counsel’s error, grossly excessive, and would serve no valid

remedial purpose. If a sanction is appropriate, it properly should be imposed only upon counsel

Stross individually, as there is no reasonable basis by which the Plaintiffs should be penalized for

his errant actions.

DATED this 21st day of February, 2007.

Respectfully submitted,

s/Gregory R. Stross
Gregory R. Stross
Attorney for Plaintiffs
2940 Wells Fargo Center
1700 Lincoln Street
Denver, Colorado 80203
Telephone 303-339-0647
Facsimile 303-572-5111
gstross@earthlink.net

and

Justin Klein
Marks & Klein, LLP
63 Riverside Avenue
Red Bank, New Jersey 07701
Telephone 732-747-7100
Facsimile 219-0625
justin@marksklein.com
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CERTIFICATE OF SERVICE

I hereby certify that on February 21, 2007 I electronically filed the foregoing Response to
Motion for Sanctions with the Clerk of the Court using the CM/ECF system which will send
notification of such filing to the following e-mail addresses:

lmacphee@perkinscoie.com — Leonard H. MacPhee, Esq.

fredric.cohen@dlapiper.com — Fredric A. Cohen, Esq.

By: s/Gregory R. Stross

Gregory R. Stross